Accounting for innovative digital technologies is complex because it is not always clear whether the NHS body is purchasing an asset that, in accounting terms, is capital expenditure or a service that is revenue or a mixture of the two. It is therefore vital that the financial impact is considered at an early stage in the development of the business case.
Capital funding from the DHSC is conditional on it being used to finance capital expenditure. This can be a challenge for innovative digital projects, where capital funding is made available for an investment that does not meet the accounting criteria for capital expenditure. There is unlikely to be a simple solution to this conundrum.
The financial arrangements for digital technologies are no different to any other project in the NHS. However, it is particularly important to understand the financial regime when developing innovative digital technologies:
- Often when the technology is new, the financial arrangements are also new, so the appropriate accounting will need to be considered from first principles. The accounting arrangements are being developed along with the technology.
- Where the digital technology does meet the definition of capital, capital is a scarce resource and there is an annual limit for the DHSC that must not be exceeded. The project must therefore be within budget, and expenditure must be made in the year for which it is planned as there are no carry-forward arrangements.
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